Forget satisfaction, you need to inspire your customers in 2016

2015 was one of the toughest years for the British retail industry but despite this, there is still scope for businesses to succeed. As Heiner Evanschitzky from Aston Business School explains.

2015 has been one of the toughest years for the British retail industry. We have witnessed the continued rise of discounters, some consolidation in convenience formats, mounting stress on high streets and independent retailers, continued over-supply of floor space, deterioration of profit margins, an on-going surge of online shopping and perhaps most importantly, the value-destruction by the Big-4 retailers, with share prices considerably lower than a year ago. In a “moment of truth” a stunning statistic was recently presented by Dave Lewis, Tesco’s CEO: between 2007 and 2014, Tesco opened 35 million square feet of new floor space (more than twice the size of all ASDA outlets taken together) while at the same time, losing market share.

The answer to the challenging retail environment has in the main been a very narrow focus on one marketing-mix element: price. Case in point: Black Friday. Black Friday has not created additional demand, but has only moved demand for Christmas gifts ahead by about a month, with no evidence of an overall increase in volume of sales. Hardly any product is sold at the “normal” price, even in the run-up to Christmas. Whilst we all like a bargain, retailers still need to make a profit in order to invest in their business. Given that retailers make about 40% of their annual profit in the Christmas period, heavy discounting so early on can only be detrimental.

It must be clear by now that fighting discounters on their home turf – price – is a lost cause. Similarly, independent retailers cannot compete with major supermarkets on breath or depth of assortment. Yet, this is precisely what they try to do.

Why aren’t retailers more innovative and more customer-focused? Increasingly, customers are searching for more than satisfying a demand. Shopping has become a leisure activity, and it’s a common pastime to spend a few hours wandering around the shops, looking at items on your imaginary wish list before stopping for coffee or lunch.

What is not necessarily part of the itinerary is making a purchase. While it can and certainly does happen if something catches their eye, it is not the ultimate goal for many when they pay a visit to their local shopping centre or high street. This has been a conflict between retailer and consumer – the retailer wants the sale, and the consumer wants a pressure-free leisure experience.

Retailers have to adapt to this change in shopping behaviour by showcasing how products can be used and how the customer can make the most of the product. In one word, customers need to be inspired.

Research has made good progress in understanding what constitutes “inspiration” and how it can be achieved in a retail context. It shows that inspiration is a far better predictor of purchase behaviour than more traditional metrics such as satisfaction.

So in the end, inspiring customers does not only make shopping more pleasurable for customers, but also more profitable for retailers. That’s what I call a win-win situation.

Heiner Evanschitzky is Professor and Chair of Marketing at Aston Business School. He has had over 100 articles published in specialist journals and proceedings and his research has won several Best Paper Awards at leading marketing conferences.

Heiner is one of the keynote speakers at #InsideAston on Wednesday 20 January 2016 at Aston Business School. #InsideAston is a day of practical updates and new perspectives on major business issues brought to you by Aston’s leading academics. To find out more and to book your place, visit our website.